Are you at a stage in your life where you want to venture out on your own but don´t know whether to buy a home? Maybe you are currently renting and are deciding whether you should buy? On the other hand, do you currently own your home and are thinking about selling it; wondering if renting would be a better choice for you? If you’ve asked yourself one of these questions, you should take the time to review your options regarding your living situation. To effectively weigh your options, let’s take a close look at the pros and cons of buying a home and renting so you can make the most feasible decision that best fits your needs.
BUYING A HOME
Everyone dreams of owning a home. Having a place to call your own is a great accomplishment and wonderful experience for you and your family. With such a great accomplishment, there are certain factors that you should consider to help ensure the experience remains a pleasant one. Extra costs, such as unexpected repairs, needed replacements, and general maintenance, are typical when it comes to being a homeowner. For this reason, you need to be confident that owning and maintaining a home is the right option for you. So, how do you know that you are ready to make this big decision? Ask yourself the following questions:
- Are you able to make a 5-20% cash down payment on a 15-year fixed-rate mortgage?
- If you buy a home, do you plan on living in that home for a long time – for at least three years or long enough to acquire a decent amount of equity?
- Do you have excessive debt – student loans, consumer debt, credit card debt, etc.?
- Will your mortgage payment (plus taxes and insurance) be less than 25% of your monthly income?
- Do you have savings for at least 3-6 months of expenses?
- Do you have a family to consider?
- Do you have an established career and/or a reliable job?
- Are you financially ready?
If you answered yes to all of these questions, you are ready to make a tremendous step and buy a home. If you answered no to any of these questions, you may want to concentrate on establishing your finances first to better manage this type of responsibility.
Before purchasing a home, you need to ensure that this is the right choice for you, as well as making sure that this is something you really want. You shouldn’t make a quick decision to purchase due to society’s expectations or perceived norms. Instead, consider your present living situation, finances, and your future goals. To help with this determination, take a look at the following information.
Buying a Home – Pros
- Ownership: Paying your mortgage means you are working to gain complete ownership of your property. Each monthly payment will bring you a step closer to fully owning your own home.
- Equity: When you make an investment on buying a home, over time, you build equity. Depending on the market and maintenance, your home will probably increase in value.
- Potential Tax Write-Offs: In most states, property taxes are tax deductible which means when you file your tax return, you could use your mortgage interest as a deduction.
- Personalization: As the owner of your home, you can make any renovations – that you desire, curtailing your home to your personal tastes and preferences.
- Quiet Enjoyment: You have your own privacy and can live in peace and harmony in your own home.
- Cost Effective: When looking at long-term costs, you save money (if done correctly) with homeownership because you have fixed monthly costs, and when the value of your property goes up and your mortgage goes down, you will get back your investment when you sell your home.
Buying a Home – Cons
- Resell Challenges: It is not easy to sell your property if you want to move or simply want to sell your home.
- Additional Costs: There could be more added monthly expenses including homeowners insurance, property taxes, HOA (Homeowners association) fees and flood policy as well as higher utility bills.
- Responsibility & Unexpected Expenses: You are completely responsible for maintenance and repairs of your property which means you either have to handle the upkeep and any repair issues or hire someone to do the job for you.
- Preparation/Qualification: Making an investment in a home/property requires careful planning, responsibility and capital. If you don’t have what it takes to make this investment, then don’t jump into it or you will get stressed and overwhelmed with financial problems.
RENTING A HOME
Renting is primarily for individuals who do not own a home. It may not be ideal for the majority of people, but it provides them an option of someplace to live. In some cases, you may prefer this option until you are ready and/or able to take that next step and purchase your own home. So, the question is: How do you know if renting is the best option for you? Ask yourself these questions:
- Are you paying off excessive debt such as student loans or credit card debt?
- Do you work in the military or don’t plan to stay in one location for a long time?
- Are you unsure about your future plans?
If you answered yes to any of these questions, then renting maybe the best choice for now. If you answered no, then you should explore your options and consider if renting or homeownership is most viable.
Similar to the pros and cons of buying, let’s review the pros and cons of renting and find out if it may be more suitable for you for the time being.
Renting – Pros
- Flexibility: You are able to move around more easily. If you like to travel or are tired of living in the same area, renting allows you to move from one place to another.
- Less Restrictive: It’s easier to get out of a rental lease than a mortgage. All you have to do is inform your landlord.
- No Responsibility: You are not responsible for repairs and maintenance. You can make these requests to your landlord and you don’t have to waste time or money.
- Maintenance Free: When looking at monthly costs, renting is less expensive. You only pay rent; you do not have to worry about maintenance, taxes and homeowner’s insurance.
Renting – Cons
- Paying Someone Else’s Mortgage: You pay rent to your landlord instead of investing in your own home. When you are paying rent, you are most likely paying the mortgage on the property plus more.
- Cost of Living: Rent rates increase each year. Your landlord will probably increase the rent every year due to inflation, competition, and rising property values.
- No Equitable Interest: Once you pay rent, it is gone and you will never get it back again. You only pay to live in that apartment; you are not entitled to tax deductions, equity or rising property value as you would be as a homeowner.
- Lack of Personalization: You do not have the freedom to renovate or change the decor. Since you do not own the residence you live in, you are not able to make changes unless you have permission from your landlord.
To Buy a Home or Rent?
Deciding whether to buy or sell is not easy.. You have to consider a variety of factors and weigh out your options to select the right decision that will work best for you. For this reason, it is a smart move to consult with a real estate professional who knows the market, industry, and has helped countless couples and individuals. At Professional Home Buyers, we provide option for home buyers and sellers in need of alternative services that most companies do not offer. We have experts who can assist you with your real estate needs. Contact us today or visit us on our website at www.ProHomeBuyer.com.